Home' Asia Pacific Defence Reporter : APDR July.August2010 Contents Asia Pacific Defence Reporter | 23
Ai Group’s Defence Council has worked closely with Defence
to assist Australian companies, especially Small and
Medium Size Enterprises (SMEs), to access global supply
In 2009, Greg Combet told the National Press Club that the
Government’s approach to defence industry policy is driven by
“supporting the efforts of local companies to secure work from
the prime (contractors) in large procurement and sustainment
contracts, and to become integrated into global supply chains.”
Mr Combet said it was important to encourage international
prime contractors to establish a significant presence in Australia,
while also noting that large international corporations dominate the
Australian defence industry.
The Government’s new defence industry policy – Building
Defence Capability: A Policy for a Smarter and More Agile Defence
Industry Base, released in June 2010, highlighted the level of
activity in Australia by off-shore originating primes. BAE Australia,
whose parent is UK-based, has total revenue amounting to 3.2%
from Australian sales and exports. Boeing Australia accounted for
0.5% of total revenue sourced to Australia, Lockheed Martin less
than 1%, Thales Australia 3%, Australian Aerospace less than 1%,
SAAB Systems 3.1% and Raytheon Australia 1.3%.
ASC, fully owned by the Australian government, is the only
Australian-owned defence prime contractor. All its work, on the
Collins-class submarines and new Air Warfare Destroyers, is
undertaken in-country, with its SME base beneficiaries.
In its submission to the defence industry policy statement
process, the Ai Group Defence Council called on the Federal
Government to work harder to provide opportunities for Australian
defence companies to access global supply chains. Doing
so is crucial to the long-term future of Australia’s industry
base, including accessing high-technology and skills essential to
support the ADF in an increasingly uncertain world.
Australian companies are generally SMEs that are largely
sub-contracted to prime contractors. Many of them also contract
directly with Defence, as well as undertaking non-defence work. A
successful example is Sydney-based Thomas Electronics, which
refurbishes cockpit display systems. It does work for the RAAF’s
F/A-18 fleet, as well supporting many major commercial airlines,
such as Qantas and Cathay Pacific. It also undertakes work for
Thales Australia, including on light armoured fighting vehicles.
There are other Australian companies with similar success stories,
but many more are capable of similar success provided they’re
given the opportunity to do so.
Defence plans to spend $100 billion over the next decade on
re-equipping and sustaining the ADF. Around 40% of this amount
will be spent off-shore, with prime contractors being the major
beneficiaries. The other $60 billion of expenditure by Defence
in-country will principally be channelled into, or through, Australian
The Australian Government recently committed to acquisition
of the first tranche of F-35 Joint Strike Fighter aircraft from
Lockheed Martin, at a total estimated cost of some $16 billion.
With most of this expenditure going off-shore, considerable
effort is being made by Defence, in partnership with industry, to
harness opportunities for Australian companies to win JSF global
supply chain opportunities. A modest start has been made, with
Australian companies winning around $170 million under this
The current deeds negotiated by Defence with Boeing, Raytheon
and Thales, with more planned, has seen nearly $70 million of
global supply chain contracts won. This is a reasonable start,
but much more needs to be done to lift the value of such activity.
The ball is squarely in the primes’ court to do so. Defence must
publicly report regularly on progress. Both the ADF and Australia’s
SMEs will benefit from doing so.
THE FOLLOWING RESPONSE
WAS PROVIDED BY HEATHER RIDOUT,
CHIEF EXECUTIVE OF THE AUSTRALIAN
The Hon Greg Combet MP, Minister for Defence Materiel and Science
answers questions after launching the new Defence Industry Policy
Statement. (L to R) Dr Ian J Watt AO Secretary of Defence (SECDEF), The
Hon Greg Combet MP, Minister for Defence Materiel and Science, and Air
Chief Marshal Angus Houston, AC, AFC Chief of the Defence Force (CDF).
GLOBAL SUPPY CHAIN REPORT
Links Archive APDR June 2010 APDR Sept 2010 Navigation Previous Page Next Page